Some of the expected benefits from outsourcing are:

* Cost reductions

* Improved service quality

* Superior competency

* Access to leading technology

* More freedom to focus on strategic activities

* Increased shareholder value

* Economy of scale

* Shared risk

Some of the expected risks from outsourcing are:

* Less contact with your customer

* The potential for lowered service quality

* Possibility of valuable data falling into competitors' hands (all respectable outsourcing partners will sign a confidentiality agreement to prevent this)

* The potential for the cost of outsourcing to exceed expectations (your outsourcing partners' initial analysis of the project should give you a fairly accurate figure)

* The erosion of in-house knowledge (if 100% of your operations are outsourced)

Things to consider in a BPO contract

* Work scope

* Rates

* Term & Termination

* Performance Guarantees

* Deflationary Pricing over length of contract

* Training costs

* Data Security, Privacy, Confidentiality and Continuity of Business

* Indemnification and Insurance

* Financial Strength of Vendor

Fixing a poorly defined contract during a project is very difficult. So getting it right is extremely important for the overall success of any BPO engagement.

Remember, a good Outsourcing company will treat this as a partnership. With that in mind, both you and your outsourcing partner must have open communication and understand the goals of your business. If you are able to communicate effectively and both feel comfortable with your introduction . . . the next steps are very crucial to maintaining a good business relationship from start to finish:

Metrics: What kind of value are you looking to attain from this relationship. Be specific . . . don't just say "I want to save money" but rather look at how you will be measuring your success. For example, the key metric for a bank is the cost to administer a mortgage every month. In the insurance marketplace, it is the cost per beneficiary per month that matters. For healthcare firms, the issue is the cost per member per month. These are the crucial business metrics for which the provider is measured and rewarded.

Know your partner: Who's on the team? What kind of qualifications do they have? Interview them . . . just like you would someone walking into your office applying for a job. If they don't know what they are talking about . . . .you'll know right away! It may also be wise to ask for a few references in order to gain some feedback on their current or past performances.

Cost and Scope: You and your outsourcing partner need to have a solid understanding on the costs, which types of service will be included and not included in the agreement, etc. In defining the service level agreement (SLA), it is important to discuss objectives for the project and measurements of success.

Without defining SLAs and key metrics upfront, confusion could arise about responsibilities. This will ensure that the project will start off on the right foot.

Have you found the team you want? Before you start, here are some important Rules for Managing the Relationship with your Outsourcing Provider

o Understand YOUR company's Goals: o Cutting costs are important but don't forget that you need to know what you want to accomplish too. What are your goals for this project or team? Communicate this with your outsourcing partner and you'll be amazed at the results. The key is . . . are we both in sync here? Are we focusing on the same concerns? You should right down your goals and expectations before even looking into any outsourcing solution. If you don't know what you want--how will your partner know?

o Establish an effective Relationship Management Process: o This doesn't mean you contact your team only when problems arise. Even though your outsourcing partner may be overseas it doesn't mean you can't communicate with your outsourcing counterparts on a consistent basis. Not only will this make for a smooth operation . . . you will actually IMPROVE your process. Think about it, you will get feedback from the team, offer your input, they will offer theirs, and before you know it . . . .you guys are smoothing out all the little "kinks" here and there. Also, the team's focus will stay aligned with your operations in the US.

Establishing a daily, weekly, quarterly and annual schedule of meetings that bring in different levels of company/service provider involvement will encourage greater flexibility, tighter business alignment and enhance the outsourcing value proposition on a continuing basis.

o Communicate the progress and benefits with your organization: o Get together with your team and talk about the progress and/or issues going on with your overseas partner. Get your home team involved . . . don't exclude them. Open communication is the key for everyone in the organization. They may also provide some insights as to what might help the offshore team or vise-versa.

It is important to make your organization aware of opportunities where the service provider can offer additional benefits to the company, and to communicate the nature and structure of those solutions. Your team at home and abroad should also be in close contact with each other.

When everyone is involved new ideas develop, the team becomes more motivated and everyone feels like a real part of the team. Basically, everyone is contributing to the success of the organization . . . it's a win-win situation.

Raj Singh is an experienced outsourcing consultant and has helped many companies leverage the benefits of offshore outsourcing. Get an edge over your competition today! Obtain your FREE resource guide "BPO: What every organization needs to know before making the move to offshore outsourcing" by visiting: http://www.bpo-1.com -- You can also receive a FREE test drive of our services w/ no obligation.

Article source: http://www.ideamarketers.com/library/article.cfm?articleid=183479